Labor costs in the US industrial sector are currently 25 percent lower than the European average. Even more significant, however, are the differences in energy costs, which are now up to 50 percent lower in the US - a gap that is likely to widen further as America's shale-gas revolution continues.

This has led energy-intensive European industries - including producers of glass, steel, chemicals and pharmaceuticals - to invest heavily in the US. Often, they manufacture high-quality upstream products, which are then processed further in Europe.

Austrian steel producer Voestalpine AG, for example, will start producing steel pellets in the southern US that will then be upgraded to high-quality alloys in Austria.

The combination of lower production costs in the US and Europe's world-class finishing capabilities is a recipe for first-rate products at competitive prices. In this way, European investment is contributing to the re-industrialization of the US while simultaneously ensuring high-quality European jobs.

But Europe must do more to reinvigorate its own manufacturing sector. The last attempt to create an EU-US free-trade zone, when Bill Clinton was the US president, failed because of the EU's rigid, antiquated agricultural policy. A new effort would help Europe to replace its agricultural policy with a research and development policy aimed at boosting industrial competitiveness.

Despite all the lip service paid at multilateral summits to policy coordination, imbalances within the global economy are fueling a rise in tensions. At a time when many are seeking salvation in nationalism, an EU-US free-trade zone would be a powerful symbol of cooperation in overcoming global challenges.

The increasing economic weight of Asia is also a geopolitical game-changer. So the focus in world politics is shifting from the Atlantic to the Pacific.

Europe should know where it belongs. An EU-US free trade zone would strengthen transatlantic political bonds and effectively refute the frequent lament that the US has lost interest in Europe.

In his second inaugural address, US President Barack Obama called an EU-US free-trade zone a core project of his second term. Secretary of State John Kerry repeated this during his visit to Germany in spring. Now it is up to export-oriented EU countries like Germany, the Netherlands, Sweden and Austria to press for action on the US offer of negotiations.

Europe has engaged in navel-gazing for too long. Its malaise has raised questions about whether its democratic capitalism will survive the economic challenge.

I, for one, prefer making political decisions to wallowing in doubt and self-pity. A transatlantic trade pact would align the US and EU economies.

The author was Chancellor of Austria in 2007-2008.

Project Syndicate.